3. Once upon a time, XYZ Company bought a piece of machinery for $300,000. The net book value of the machine is currently $60,000. The company could spend $100,000 on updating the machine and use to produce the new product which could generate a contribution of $150,000. The machine would be depreciated at $60,000 per annum. Alternatively, if the machine is not updated, the company could sell it now for $75,000. Required: What is the relevant cost of the machine that should be considered in determining whether to produce the new product or not?

3. Once upon a time, XYZ Company bought a piece of machinery for $300,000. The net book value of the machine is currently $60,000. The company could spend $100,000 on updating the machine and use to produce the new product which could generate a contribution of $150,000. The machine would be depreciated at $60,000 per annum. Alternatively, if the machine is not updated, the company could sell it now for $75,000. Required: What is the relevant cost of the machine that should be considered in determining whether to produce the new product or not?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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